Oversupply, steadily reduced demand, and milk alternatives have caused thousands of dairy farms to shut down. Many small and medium-sized farms sell to these larger producers, so when one closes, it can be detrimental to many farms across the country. With so many factors fighting against dairies, Farm Bureau Financial Services is committed to helping you protect your bottom line by offering Dairy Revenue Protection (DRP).
What Is Dairy Revenue Protection?
Dairy Revenue Protection is a tool that insures against unexpected declines in quarterly revenue from milk sales as a result of a decline in milk prices, a decline in milk production or a combination of both.
The expected revenue is based on futures prices for milk and dairy commodities, and the amount of covered milk production elected by you, the dairy producer. The covered milk production is indexed to the state or region where you are located.
How does it work?
- Quarterly insurance period(s) to insure
- Value of milk (class and component pricing options)
- Amount of milk to cover for the quarter
- Level of coverage (80 to 95 percent)
- Protection factor (100 to 150 percent)
DRP offers two revenue pricing options you can choose from. Both are designed to allow you to customize your price elections to more accurately reflect your own revenue risk.
Ending Milk Prices and Yield
The actual ending milk or component values are based on the monthly average prices announced by USDA’s Agricultural Marketing Service. Actual ending values are posted on RMA’s website at the end of the insurance period. Milk yields are based upon USDA’s National Agricultural Statistics Service Milk Production report.
Once USDA’s report is released, it is used to calculate an actual milk revenue for the quarter. If the milk revenue falls below the final revenue guarantee, you maybe be paid an indemnity based on the difference.
To learn more about how we can protect your dairy operation, reach out to your Farm Bureau agent!
Reduced demand stat: International Dairy Foods Association
Oversupply stat: USDA
Milk alternatives stat: Fortune Business Insights
Per capita consumption stat: Statista